Since the beginning of 2020, ChainLink has been the most popular and profitable ICO project. Besides its popularity and profitability, most investors are still failing to understand what is ChainLink and why it matters. The key to understand the value of ChainLink is having a deep understanding of Oracle. In addition to the intercommunication of data, blockchain plays a more important role to obtain data outside the blockchain in order to obtain large-scale adoption and construct meaningful data.
What is an Oracle?
Oracle is not a new thing. In the movie "The Imitation Game", Turing was recruited by MI6 in World War II to decipher the German Enigma communication code. The large-scale deciphering machinery built by Turing also helped Britain successfully defeat the German army.
This large machine is not only the prototype of the computer, but also the Turing machine we often call, and it is also a form of Oracle.
The Oracle machine is built on a Turing machine (computer) to answer the set of specific questions, as long as the set of specific questions is successfully established, the answer can be translated.
The problem of Oracle on the blockchain
We know that an Oracle is a specific problem-solving machine built on a computer, so why does the blockchain world need an oracle?
In the world of blockchain, the positioning of the oracle is a bit different from what we mentioned above.
The blockchain is a closed system. Therefore, the smart contracts running on the blockchain cannot directly obtain information outside the blockchain, and the world of the blockchain will be disconnected from our real world, completely unable to achieve large-scale adoption.
At this time, you may think that it is better to set up a database or node by yourself and connect the required off-chain data to the smart contract. For example, I code to capture the lottery data of each day to the smart contract. Everyone can use my lottery smart contract for the lottery based on blockchain.
What's the problem? Let's get rid of the legality of the game. Such a structure will make the credibility of the smart contract completely depend on the database or node you are building. If it is due to natural or man-made disasters, the fail of the nodes may lead to severe malfunction of the entire smart contract, which may lead to irreversible damage to the entire blockchain.
Take the lottery just mentioned as an example:
- The node is attacked, and the lottery result inside is replaced with fake data
- Hackers place bets based on fake information
- Win all the bets on smart contracts
This is just one possible issue. Others could be time lag, unexpected downtime, and programming errors, which may affect the database or node and cause the smart contract to fail or easily be attacked.
Solution by ChainLink
Single external data is unreliable and has security concerns. If the integrity and authenticity of the data source can be ensured and the decentralization of the data source can be maintained, the system will not have a single point of failure and the topic of blockchain connecting the real world will be totally solved.
Based on this demand, Chainlink was born. The decentralized oracle created by Chainlink is to ensure that the blockchain connects to external data without a single point of failure and can ensure data credibility.
What Chainlink does is, in the simplest terms, "smart contract of smart contract", but the smart contract of Chainlink obtains data from multiple external data and then uploads it to the user's smart contract after integration. It is a bridge between the blockchain and the real world.
After multiple oracles collect their own data results, they can upload these multiple results to the blockchain. These results will then be processed in Chainlink's smart contract on the blockchain, to finalize the unique result to the data demander.
In the case of the lottery we mentioned just now, the principle is to organize data off-chain before uploading it to the blockchain, but the architecture of Chainlink is processing data on the chain and then sent to the data demander.
The advantages of Chainlink doing this are:
The on-chain processing can link the data provided by different oracle nodes with their identities, and store them in an immutable way through the blockchain to maintain Chainlink's node reputation system.
Through decentralized nodes, secondary screening and multiple filtering can further enhance the reliability of data.
Value of ChainLink
The blocker that preventing blockchain from a large-scale business application is the difficulty of connecting real-world data to the blockchain data. As discussed above, ChainLink provides a secure and reliable solution to squeeze the gap and realize a seamless data off-chain on-chain transaction.
The entire blockchain industry is still at an early stage and there’s still a huge potential for the ChainLink project.
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